Financial Reporting: Assignment

FINANCIAL
REPORTING

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Regulatory frameworks and governance of financial accounting..........................................3
P2 The purpose of the financial reporting for meeting the organisational development,
objectives and growth..................................................................................................................4
TASK 2............................................................................................................................................6
P3 Interpretation of profit & loss, balance sheet and cash flows.................................................6
P4 Financial ratios for organisational performance and investment...........................................7
TASK 3............................................................................................................................................8
P5 Benefits of international financial reporting standards (IFRS) and international accounting
standard (IAS)..............................................................................................................................8
P6 Models of financial reporting and auditing............................................................................9
TASK 4..........................................................................................................................................11
P7 Differences and importance of the financial reporting across the countries........................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
APPENDIX....................................................................................................................................16

INTRODUCTION
Financial reporting is the presentation of financial result of the organisations in a
particular format (Jung and Weber, 2014). Eventually, financial reporting states about the
financial performance of the companies for a particular time period as well as it is necessary to
the companies to prepare the financial reports not only for the own purpose but also for external
parties. Herein, the project report, the objectives and regulatory frameworks of the financial
reporting are mentioned. As well as benefits of IFRS (international financial reporting standards)
and IAS (international accounting standards) are described in the report. In this report Lloyd
banking group Ltd company is selected to understand in detail about the financial reporting and
company's financial statements are also described.
TASK 1.
P1 Regulatory frameworks and governance of financial accounting.
Financial reporting: It is a combination or discloser of financial results which include
the various information which help the internal as well as external stakeholders to take their
decision on the basis of these financial reports (Ryan, 2012). It plays very crucial role in the
world's economy and it's main purpose is to provide relevant information to their users such as
owners. Division between the ownership or control over the company and it occurs in the public
limited company. Where shares are sold to the general public through share market. At the time
of preparing reports, shareholders are not interfere in the management decision that's why they
appoint directors. Important decision taken by the directors to the interest of shareholders. Owner
of the company get the final report which include the summary and financial reports which
shows the financial position of the company. It further helps in taking decision regarding further
investment and strategies.
Regulatory framework: It is a set of accounting practices which include the various
standards and it also contain some rules and principle to handle companies accounts. Purpose of
this framework is to prepare financial statements and it is important to fulfil the requirement.
Lloyd banking limited company follow the International Financial Reporting Standards (IFRS)
to produce their financial statement.
International Financial Reporting Standards (IFRS): It is a set of accounting
standards which is develop by the non- profit organisation and it also called International

Accounting Standards Board (IASB). Lloyd banking limited company follow IFRS regulatory
framework to identify how public or private organisation disclose their financial reports. This
framework provide the general guidelines which is required by the business at the time of
preparing their financial statements. Their are various standards followed by the Lloyd banking
limited company but some of it discussed below:
IFRS-2 (Share based payment): Organisation need to specify this standard if they
undertake a share based payment which include the issue of share options (Martínez‐Ferrero,
Garcia‐Sanchez, Cuadrado‐Ballesteros, 2015). Lloyd banking limited company required to
include these things in the financial statements.
IFRS-3 (Business Combination): It include 3 principles which define that how business
combination acquire. Firstly recognise their financial statements in terms of assets or liability of
the company and how much they acquire interest from other parties. Secondly acquire the
goodwill at the time of combining business. Last one is to determine that, what information
required to be disclose for their users.
IFRS-4 (Insurance Contract): In this accounting standard, organisation need to specify
some aspects for the financial reporting regarding insurance contract. It will be issued when this
contract not applied in the IFRS-17. Insurance contract means, when one party accept the
insurance risk from another party and it also important that front party agree to be compensate
for this.
IFRS-7 (Discloser of Financial Instruments): This accounting standard include the
discloser of financial instrument in the financial statement. So internal as well as external users
can evaluate the performances and financial position of the company (Albu and Albu, 2012). It
also include the information regarding risk which occur through financial statements. These are
the quantitative discloser but it also include the qualitative discloser too. Such as management
objective, aim of the organisation, different policies and process to reduce risk.
P2 The purpose of the financial reporting for meeting the organisational development, objectives
and growth.
Financial reports shows the actual image of the companies with the help of different
financial statements like balance sheet, profit & loss etc. In broad sense, the financial reports are
beneficial for the development and growth of the companies. Herein, the aspect of the project
report the Lloyd banking limited company prepares different kind of financial reports like

balance sheet, income statements etc. The benefits of the financial reporting are mentioned
below:
 Helps in decision-making- The financial reporting is important for the companies in
making appropriate decision (Maffett, 2012). This is why because with the use of the
financial statements, businesses can check about their performance and on the basis of it
important decisions can be taken. As well as, the financial statements provides detailed
information about the profitability, loss, assets and liabilities. Herein, the Lloyd banking
limited company makes their financial reports and on the basis of it they make their
major decisions.
 Beneficial in getting the credit- Mostly financials institutions and banks provide the
loans on the basis of financial reports of the companies. In other words, the credit limit of
the companies depend on their financial performance and it is presented by the financial
statements. If a company's financial condition is good from last few years then it would
be easy for the company to get the loan instantly of huge amount. Majorly, banks
evaluate the income statement, balance sheets to provide the loan. Herein, it is important
that financial statements should be prepare as per the particular accounting standards.
Like the Lloyd banking limited company offers loan to the different small companies on
the basis of their financial reports. As well as this company also gets the loan from the
central bank of UK, on the basis of their financial reports.
 Provide financial information to external parties- Financial reporting is useful in
providing the financial informations to the external parties like shareholders, stakeholders
etc. Eventually, it is beneficial for the company because if company's financial condition
is good then more investor will invest in the company and it will increase company's
capital. As well as goodwill will also increase. So it is a big advantage of the financial
reporting. Herein, it is important that company should publish their financial reports
accurately without any manipulation in the financial statements. The Lloyd banking
limited company presents their financial information in front of the stakeholders so that
they can invest in their company.
 Determine company's future- Different types of financial statements are useful in
predicting the company's future (Beaver, Correia and McNichols, 2012). This is why
because if company's financial performance is improving in each financial year and then

it can be predict that company will be better side in future. Apart from it, if company's
financial performance is decreasing continuously then it can be predict that company will
not exist in future. So financial performance is the key of success and it is presented with
the help of financial reports. Like in the Lloyd banking limited company, they make a
wide range of financial statements which help them in evaluating their future situation.
 Helps in better management- The financial reporting is also beneficial in effective
management of the companies. This is possible with the help of the financial statements
and reports. If company's financial position is weak then they can plan to make efficient
use of resources and it overall result in the better management. With the help of financial
reports, company can check that which activities are high profitable and which ones are
not. The Lloyd banking limited company manage their activities on the basis of their
financial reports..
So on the basis of above benefits of the financial reporting, it can be analysed that
financials statements are useful in the development and growth of the organisations.
TASK 2.
P3 Interpretation of profit & loss, balance sheet and cash flows.
1. Profit & loss account- Mentioned in the appendix.
Interpretation- The profit and loss account defines about the profits and losses of
companies. On the basis of profit and loss account of year 2018, company is generating the profit
of £24834. This profit is less in compare to last year. Their total interest income is of £14671 and
they do not have any interest expenses in 2018. As well as their other assets are of £14671. So
company is earning good revenue but less in compare to 2017.
2.Balance sheet- Mentioned in appendix.
Interpretation- Balance sheet states about the assets and liabilities for a particular time
period. The balance sheet of Lloyd banking limited company showing the assets of £797,598 for
year 2018 and their total liabilities are of £797,324 (About financial statement of company,
2018). Herein, company's assets are more then the liabilities. Though, difference is not of too
much amount. They have additional assets of £274 in their balance sheet. As well as it shows
that company has enough assets to pay their liabilities.

3. Cash flow- Mentioned in appendix.
Interpretation- Cash-flows of company presents about that movement of cash in the
organisation. Herein, the cash-flows of Lloyd banking limited showing that company has the
cash out flow of £(11107) from the operating activities. As well as their cash inflow from
investing activities is of £11921. Apart from it, their cash out flow from the financing activities is
of £(4301). So company has more cash out flows which means company is spending more cash
in compare to earning. Their cash at beginning is of £58708 and cash at end of period is of
£55,224.
P4 Financial ratios for organisational performance and investment..
The financial ratios determines about the financial situation of the companies. The ratios
of Lloyd banking limited company are mentioned below:
Year/ Ratio Earning per share Financial
leverage
Debt/equity ratio Assets turnover
ratio
2016 0.02 0.21 1.76 0.06
2017 0.05 0.43 1.58 0.06
2018 0.06 0.49 1.88 0.05
Interpretation- On the basis of above mentioned ratios, it has been analysed that
company's financial performance is quite acceptable but not so impressive. Like company is
getting the earning per share 0.02 in year 2016. This ratio increased in the next year and it
became 0.05. As well as in 2018, this ratio increased and became 0.06.
Same as the in the financial leverage ratio, their ratio is increasing continuously like in
2016, it was of 0.21. It increased by some margin and became 0.43 in 2017 as well as in next
year 2018, it increased and became 0.49.
Herein, the debt/equity ratio there ratio is fluctuating. Like in the 2016 it was of 1.76 and
it decreased in next year and became 1.58. In next year 2018, company progressed and became
1.88.
Company's assets turnover ratio is constant in two years which was of 0.06 and it
decreased in 2018 and became 0.05.

TASK 3.
P5 Benefits of international financial reporting standards (IFRS) and international accounting
standard (IAS).
International financial reporting standards (IFRS)- The IFRS evolves the common
rules and regulations to prepare the financial statements (Council and Britain, 2015). The main
objective of the IFRS is to make the financial statements transparent, accurate and comparable
all around the word. Generally, the IFRS are issued by the international accounting standard
board (IASB). Different rules of the international financial reporting standards defines about way
through which companies can maintain their financial statements. Additionally, IFRS was
evolved to develop a common and equal accounting language through which companies and
their financial statements can be consistent from company to company. The Lloyd banking group
limited company follows the rules of the international financial reporting standards to prepare
their financial statements. Herein, some advantages of IFRS are mentioned below:
 Provides comparability- The international financial reporting standards offers
comparability to the business in the financial statements. Specially, those companies
which have branches in different countries then this can be useful for them in preparing
the financial statements with an equal standard. As well as due to this, companies can
compare their financial reports effectively. The Lloyd banking group limited company
applies the IFRS to make their financial documents more comparable.
 Flexibility- The IFRS provides flexibility to the companies in adopting the rules and
regulation as per their need. Though, there are certain standards which are compulsory to
be followed but it offers some flexibility to the organisations in preparation of the
financial statements. The Lloyd banking group limited company has the flexibility in the
implementation of the accounting standards for making their financial reports.
 Beneficial for small and new business- The international financial reporting standards
are useful for the new and small business (FRS 102Johnston and Petacchi, 2017). This is
why because it can help the new business in preparation of financial reports with higher
accuracy and quality. As well as it can guide to the new and small business to follow a

particular rules and format for financial statements. Though Lloyd banking group is not a
new venture but it helps them in preparation of their financial statements fair and
accurate.
International accounting standards (IAS) – The international accounting standards are
replaced by the IFRS in 2001. Eventually, the IAS were the first accounting standards which
were issued by the international accounting standard committee (Skaife, Wangerin,2013). It has
following advantages:
 Facilitate ethical compliance- The culture and tradition of countries are different from
each other as well as their process of making financial statement is also different. Herein,
the international accounting standard plays an important role in managing the ethical
compliances by applying an equal method of preparation of financial standards.
 Improves the international investment- One of the key advantage of the IAS is that it
improves the international investment. This is why because if companies follow the
standards and rules of the international accounting standards then it becomes easy for the
investors to assess the financial situation. Due to the level of the investment can be
increase by the investors. If Lloyd company applies the IAS in their financial reports then
more investors will invest in their business all around the world.
 Sets generalized standards- International accounting standards are beneficial in setting the
standards (K. Johl, S., Kaur Johl, Subramaniam and Cooper, 2013). This is why because
with the help of international accounting standards, companies can fix a particular
standard for preparation of the financial reports. As well as due to international
accounting standards, the financial statement of the companies becomes comparative and
reliable. So overall the international accounting standards are useful in setting the
generalized standards.
P6 Models of financial reporting and auditing.
The models of financial reporting and auditing are useful for preparation of financial
reporting and auditing. There are different kind of models of financial reporting and auditing.
Some of these models are being used by the Lloyd company for financial reporting and auditing
which are mentioned below:

Models of financial reporting-
 Three statement model- The three statement model is a kind of model which is related to
the preparation of balance sheet, income statement and cash flows in combine.
Eventually, this model is useful for the companies and for the investors because due to
this model all three statements can be viewed in a combine statement (Shivakumar,
2013). Basically this model is used on the excel sheet with the use of appropriate
formulas. This model of financial reporting is being used by the Lloyd company for
preparation of balance sheet, income statement and cash flows jointly.
 Merger model- The merger model is useful in analysing about the merger of two or more
companies in a joint company. This model is advanced model that states about the merger
and acquisition of the firms. Additionally, this model defines all the financial details
including the assets, liabilities, incomes, profits etc. of the merged companies. This
model can be used by the Lloyd banking group limited if they merge in any other
company.
 Budget model- This model is being used by the companies for financial planning and
analysis to get the budgets together for upcoming time periods (.Cassell, Giroux, Myers
and Omer, 2013). Eventually, budgets models are designed on the basis of previous
information of the budgets. The Lloyd banking group limited company implements this
model for their future financial planning.
 Consolidation model- The consolidation model is a type of financial model which is
prepared by combination of financial results of two or more businesses into a single
model. Generally, the first sheet of this model defines the highest figures of income
statement, balance sheet or profit & loss in the terms of charts and tables. On the other
hand, the other sheets of this model states about the financial data of any particular
product or business activity.
Models of auditing-
The models of the auditing includes the model audit which assures that mistakes in the
spreadsheets are eliminated. Generally, the model audit is used by those organisation which are
from the banking sector. In these organisations this model ensures that the data which is entered
in the spreadsheets is accurate and correct.

In general term, the main objective of the auditing is to evaluate that financial statements
of the companies are accurate or not. The auditing checks the errors of the financial statements.
The model audit makes the task of auditing more reliable and accurate by cross checking of the
results to protect from any error. This model is being used by the Lloyd banking limited
company in their auditing process to make the auditing accurate. As well as to ensure the
external users that company's financial reports are accurate and without any error.
TASK 4.
P7 Differences and importance of the financial reporting across the countries.
Financial reporting is a mandatory part for all the businesses to present their financial
position and performance (Shivakumar, 2013). Eventually, companies from different countries
follow various kind of accounting standards and formats. Like in the USA the financial
statements are being prepared with the use of GAAP (Generally accepted accounting principle).
As well as in the UK, if companies securities are traded in the regulated market then they follow
the IFRS. So different countries use various kind of accounting standards. For example, the
Lloyd banking limited company operates in the United Kingdom and they make their financial
reports on the basis of IFRS. Herein, the differences of financial reporting among some countries
are mentioned below:
UK USA AUSTRALIA
Accounting standard IFRS (international
financial reporting
standard) for
preparation of
financial reports.
GAAP (Generally
accepted accounting
principles).
AASB (Australian
accounting standard
board).
Accounting time
period
In the UK, the
financial year runs
from 1st April to 31st
March.
USA makes their
financial reports as per
the time period of 1st
October to 30th
September.
In the Australia, the
financial reports are
prepared for the time
period of 1st July to
30th June.

So these are difference in the financial reporting of various countries. They use different
accounting standards and time period for preparation of the financial reports. Though different
countries follow various accounting standards for preparation of the financial reports but purpose
of all the accounting standards is equal and that is making the financial statements accurate.
The benefits of the financial reporting are common for all the countries because purpose
of all accounting standard is same. Herein, advantages of the financial reporting are mentioned
below:
 Improved debt management- One of the key importance of the financial reporting is
that it is beneficial in proper management of the debt (Abeysekera, 2013). This is why
because if companies will make the all needed financial statements then they will be able
to check about how many debt they have in the market. Like balance sheet presents about
the assets and liabilities of the firms and due to this organisations can check about how
many assets they have to pay their creditors. In the Lloyd banking limited company, they
manage their debt through financial statements because these reports analyse about the
debts and income.
 Trend identification- The financial reporting are also beneficial in the trend
identification by reviewing of past financial information. Due to these reports, companies
can evaluate about which activities were beneficial for them in the recent time period. It
is a common feature of the financial reporting which is being used by all the companies
all around the world. Like the Lloyd banking limited company, makes their financial
reports on the basis of IFRS (international financial reporting standard) which shows their
trend of their financial reports.
 Progress and compliance- Financial reporting are also useful in the evaluation of the
progress and compliance (Ryan, 2012). Basically, it is possible by the various statements
like profit and loss, income statement, cash flows etc. Due to this, progress and
compliance can be measure easily. It is a common benefit of the financial reporting
which is applicable for all the companies of different countries. For example, the Lloyd
banking limited company evaluate their financial progress on the basis of financial
reports. As well as other companies of different countries also analyse their progress with
the help of financial reports.

CONCLUSION
From the above discussion it has been concluded that, every organisation need to follow
regulatory framework which provide the detail idea about how to produce financial reports and
other statements. With the help of IFRS, organisation meet with their objectives & goals which
further helps in increasing their profit margin. Financial statements such as profit & loss
accounts, cash flow or balance sheet provide the actual position of the company and their
performances in the market. With the help of ration's calculation, business identify their
performance. In addition, IAS or IFRS provide various benefits in order to provide various
guidelines regrading preparation of financial statements. With the help of various theories and
concepts company evaluate their records or statements. Along with this, financial reporting help
the other countries through providing various standard which is adopted by the organisations.

REFERENCES
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Accounting. 6(3–4). pp.187-354.
Martínez‐Ferrero, J., Garcia‐Sanchez, I. M. and Cuadrado‐Ballesteros, B., 2015. Effect of
financial reporting quality on sustainability information disclosure.Corporate Social
Responsibility and Environmental Management. 22(1). pp.45-64.
Albu, N. and Albu, C. N., 2012. International Financial Reporting Standards in an emerging
economy: lessons from Romania.Australian accounting review. 22(4). pp.341-352.
Maffett, M., 2012. Financial reporting opacity and informed trading by international institutional
investors.Journal of Accounting and Economics. 54(2-3). pp.201-220.
Beaver, W. H., Correia, M. and McNichols, M .F., 2012. Do differences in financial reporting
attributes impair the predictive ability of financial ratios for bankruptcy?.Review of
Accounting Studies. 17(4). pp.969-1010.
Council, F .R. and Britain, G., 2015.FRS 102: The Financial Reporting Standard Applicable in
the UK and Republic of Ireland. Financial Reporting Council Limited.
Johnston, R. and Petacchi, R., 2017. Regulatory oversight of financial reporting: Securities and
Exchange Commission comment letters. Contemporary Accounting Research. 34(2).
pp.1128-1155.
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go bust. Contemporary Accounting Research. 30(2). pp.719-749.
K. Johl, S., Kaur Johl, S., Subramaniam, N. and Cooper, B., 2013. Internal audit function, board
quality and financial reporting quality: evidence from Malaysia. Managerial Auditing
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Shivakumar, L., 2013. The role of financial reporting in debt contracting and in stewardship.
Accounting and Business Research. 43(4). pp.362-383.
Cassell, C .A., Giroux, G., Myers, L. A. and Omer, T. C., 2013. The emergence of second‐tier
auditors in the US: Evidence from investor perceptions of financial reporting
credibility.Journal of Business Finance & Accounting. 40(3-4). pp.350-372.

Shivakumar, L., 2013. The role of financial reporting in debt contracting and in stewardship.
Accounting and Business Research. 43(4). pp.362-383.
Abeysekera, I., 2013. A template for integrated reporting. Journal of Intellectual Capital. 14(2).
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Online:
About financial statement of company. 2018. [online]. Available through
<http://financials.morningstar.com/ratios/r.html?t=LLOY&region=gbr&culture=en-US>

APPENDIX
1. Profit and loss account for year 2018.

2. Balance sheet:

3. Cash flow: